Arkansas Provides Path for Making Medicaid Expansion Attractive for All

Only 25 states have expanded Medicaid so far, but some see ways to make expansion attractive for both parties in every state.

Just before Thanksgiving, a special session of New Hampshire's legislature that was convened to address expanding Medicaid -- a central part of Obamacare -- collapsed without a deal.

Both parties agreed to give the newly eligible people federal subsidies so they could buy coverage on the online insurance market -- a plan pioneered by Arkansas. But Senate Democrats wanted to offer those people Medicaid coverage from the state until federal waivers for the plan were approved, and Republicans (who control the Senate) refused.

The Granite State highlights the great challenge of expanding Medicaid for the states that are considering the possibility. So far, 25 states and the District of Columbia have expanded coverage, and Virginia's new governor is committed to making that 26. The rest have rejected expansion but many lawmakers in those states are looking for ways to appease reluctant conservatives through greater privatization, cost-sharing and other sometimes controversial means to find a path to expansion in 2014 or 2015. The battle will be difficult, and we asked Matt Salo, executive director of the National Association of Medicaid Directors, to walk us along the front lines.

What's the situation on the ground in the fight to expand Medicaid?

There are a bunch of states that are currently at "no" but want to get to "yes." They're looking at their options, which appear to be either do it or don't do it, and a lot of states are saying, "We want another option on the table."

Clearly there's been some progress. Arkansas has been able to figure out a third way forward, where most [new Medicaid enrollees] will get coverage through the private insurance exchange. The other states are trying to figure out some kind of way forward that gives them either the political cover to say, "This isn't Obamacare" or the philosophical or ideological changes to say, "This is what we require before we do a big expansion."

How do you see movement on Medicaid happening?

There are essentially three angles. The Arkansas angle is: We're happy to expand, but we want most people in the exchange. Others are saying: We want to do more around cost-sharing, so is there some flexibility in premiums and copays? And the final angle is what I call the "personal responsibility approach." You see that in Michigan, Pennsylvania and Iowa, which are all looking to add things like drug testing, lifetime limits and job search requirements to Medicaid coverage. Practically every state would potentially be interested if they can get some version of some of those proposals approved.

All these changes require waivers. What's the chance of those being approved by the feds?

Well, with Arkansas they said yes. But some other states are still awaiting approval. Michigan has a proposal on the table, but CMS [the Centers for Medicare & Medicaid] hasn't signed off yet.

The Obama administration said the Arkansas model is OK, but that they would only approve it for a limited number of states. And they never defined what "limited" is -- one, two, five, 10?

Around cost-sharing, it gets a little bit more dicey: The feds view copays as punitive and want to be careful about that, but a proposal could be crafted creatively. For example, if you go to all your check-ups, then your premium is waived -- you might get CMS to sign off on that.

But with the personal responsibility approach and things like drug testing, the administration is just going to flat out say no.

Whom do you expect to succeed with expansion in the next year or two?

It's real hard to handicap this. Montana voted to expand, but one legislator recorded a vote wrong and that sunk the proposal for 2014. They will probably do it in 2015 without a lot of fuss. Tennessee wants to do a partial expansion (up to 100 percent of the poverty level) and for anyone above that, the exchange takes over. The administration said no to that, so we'll see who blinks first. Pennsylvania is close. Michigan and Iowa have very serious proposals that have some version of Arkansas flavors, some cost-sharing and some personal responsibility, but again, how comfortable is the administration with these? And Virginia's incoming governor is very pro-expansion, but it's too soon to know what will play out there.

What else do you see in your crystal ball?

The final thing I would watch for, and this is really interesting, goes back to Arkansas. Earlier this year, there was a very different political landscape. The administration was convinced most states would expand and HealthCare.gov would work. That is not the case, so now, because of the challenges of HealthCare.gov, there are some real questions about whether enrollment in the exchanges will be sufficient to keep them going. When you look closer at the Arkansas model, it's not just a way to get Medicaid expansion; it puts the most costly individuals in Medicaid and moves the healthier people into the exchange. In fact, Arkansas argued that unless they did that, they couldn't sustain their exchange.

If that's good for Arkansas, and the administration says anyone can do it, they can claim everyone expanded because all the states drew down dollars but did it in the private market. So it's not Obamacare and you get people in the exchanges. It could be a win-win-win here. But I don't know how the administration goes.

A lot of our members want to see people covered. The states want to get there, but they want to be met halfway or three-quarters of the way there. And remember, when Medicaid started in 1965, a lot of states sat out the first couple of years out. It took about five years to get almost everybody in. So is there a huge downside for states to hold out? They may have less leverage in the future, but they may also have more.